M/s Keshari Estates (P) Ltd, Bhubaneswar v. CIT, Bhubaneswar

ITA 198/CTK/2009 | 2004-2005
Pronouncement Date: 23-07-2010 | Result: Allowed

Appeal Details

RSA Number 19822114 RSA 2009
Assessee PAN AABCK3735C
Bench Cuttack
Appeal Number ITA 198/CTK/2009
Duration Of Justice 1 year(s) 1 month(s) 21 day(s)
Appellant M/s Keshari Estates (P) Ltd, Bhubaneswar
Respondent CIT, Bhubaneswar
Appeal Type Income Tax Appeal
Pronouncement Date 23-07-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 23-07-2010
Date Of Final Hearing 19-07-2010
Next Hearing Date 19-07-2010
Assessment Year 2004-2005
Appeal Filed On 02-06-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE HONBLE SHRI D.K.TYAGI JUDICIAL MEMBER. /AND HONBLE SHRI K.K.GUPTA ACCOUNTANT MEMBER . / I.TA.NO . 198/CTK/2009 / ASSESSMENT YEAR 2004 - 05 M/S.KESHARI ESTATES (P) LTD. 98 KHARAVEL NAGAR BHUBANESWAR AABCK 3735 C - - - VERSUS - . COMMISSIONER OF INCOME - TAX BHUBANESWAR. / A PPELLANT RESPONDENT FOR THE APPELLANT : SHRI B.K.MAHAPATRA AR FOR THE RESPONDENT : SHRI A.K.GAUTAM DR / ORDER THE ASSESSEE IS IN APPEAL RAISING THE FOLLOWING GROUNDS. L. THAT THE LEARNED COMMISSIONER OF INCOME TAX HAS SET ASIDE THE ASSESSMENT ORDER PASSED U/S.143(3)FOR MAKING FRESH ASSESSMENT BY THE ASSESSING OFFICER. 2. THAT THE LEARNED COMMISSIONER O F INCOME TAX HAS FURTHER ERRED IN HOLDING THAT DETERMINATION OF WORK IN PROGRESS IS ERRONEOUS OPPOSED TO FATES NOT VALID IN LAW. 3. HENCE THE ACTION OF LEARNED ASSESSING OFFICER SETTING ASIDE THE ORDER PASSED U/S.143(3) & REOPENING U/S.263 OF INCOME TAX A CT LIABLE TO BE PASSED ON. 5. THAT FURTHER GROUND(S) OF APPEAL MAY BE SUBMITTED ON OR BEFORE THE DATE OF HEARING. 2. THE LEARNED COUNSEL FOR THE ASSESSEE WHILE REITERATING THE FACTS SUBMITTED THAT IN A SHOW CAUSE NOTICE INVOKING THE PROVISIONS OF SECTIO N 263 THE LEARNED COMMISSIONER OF INCOME - TAX UNDER THE REVISIONARY POWER OBSERVED THAT TAKING INTO ACCOUNT THE AMOUNT OF WORK IN PROGRESS CHARGED TO THE P & L ACCOUNT DURING THE YEAR AND THE TWO TDS CERTIFICATES THE CONTRACTUAL RECEIPT WORKS OUT TO BE RS .5 11 09 615 [RS.3 44 88 375 (WORK IN PROGRESS + RS.1 66 21 440 (TDS)]. HOWEVER THE ASSESSEE HAD DISCLOSED RS.4 52 77 090 SHRI K.K.GUPTA ACCOUNTANT MEM BER . I.TA.NO .198/CTK/2009 2 AS ITS GROSS CONTRACTUAL RECEIPT AS PER THE P & L ACCOUNT. ACCORDINGLY HE ISSUED SHOW CAUSE TO THE ASSESSEE TO EXPLAIN. 3. ON THE DATE FIXED FOR HEARING TO COMPLY WITH THE SHOW CAUSE NOTICE THE ASSESSEE SUBMITTED THAT THEY HAVE TRANSFERRED RS.3 44 88 375 WORK IN PROGRESS TO PROFIT AND LOSS ACCOUNT. THE RE LATED CONTRACTUAL RECEIPT OF RS.3 74 05 850 HAS BEEN SHOWN IN THE PROFIT AND LOSS A CCOUNT IN RESPECT OF HOUSING WORK AND IN RESPECT OF LAND DEVELOPMENT WORK CONTR ACT RECEIPT RS.78 71 240 AND ITS DIRECT EXPENSES RS.70 86 243. THE FIGURE RS. 1 66 21 440 IS NOWHERE MENTIONED IN THE ACCOUNTING STATEMENT. RS.3 44 88 375 AS MENTIONED BY THE L EARNED CIT WAS NOT THEIR R ECEIPTS RATHER THIS WAS THEIR EXPENSE WHICH WAS DEBITED TO PROFIT AND LOSS ACCOUNT UNDER VARIOUS HEADS AS PER STATEMENT - 1 SUBMITTED BEFORE THE LEARNED CIT . FURTHER THE ASSESSEE SUBMITTED THAT THEIR EMPLOYER DEDUCTS TDS ON ADVANC E PAYMENT ALSO WHICH IS AS PER L AW. BUT WHAT THEY BOOK TO THE PROFIT AND LOSS ACCOUNT IS BASED ON WORK COMPLETION. HOWEVER TDS CLAIMED DEDUCTED FOR A PARTICULAR FINANCIAL YEAR HAS TO BE CLAIMED AGAINST TAX DUE OF THE RELEVANT ASSESSMENT YEAR. GROSSING OF TDS TO DETERMINE THE CONTRACT VALUE UNDER COMPLETION CON TRACT METHOD IN A GIVEN YEAR ARITHMETICALLY IS INCORRECT. MOREOVER THE SAME FIGURE ADDED WITH WORK IN PROGRESS (EXPENSES) TO DETERMINE THE TOTAL REVENUE GIVES NO MEANINGFUL BASIS OF REVENUE DETERMINA TION BUT LEADS TO ABSURDITY . SINCE THE POINT RAISED IS BASED ON A CONTRADICTORY FACT THE ASSESSEE REQUESTED THE LEARNED CIT TO DROP THE PROCEEDINGS U/S.263. 4. HOWEVER THE LEARNED CIT CHOSE TO CONSIDER THE ASSESSEES SUBMISSION AS NOT SATISFACTORY AND IN HIS ORDER NOTED THAT IN VIEW OF THE VARIOUS DISCREPANCIES DISCUSSED IN THE ORDER U/S.263 AND THE LACK OF ADEQUATE EXPLANATION IN THE SUBMISSION OF THE ASSESSEE ITS PLEA IN THIS REGARD IS NOT ACCEPTABLE. HE THEREFORE DEEM ED IT PROPER TO CANCEL THE ASSES SMEN T FOR TH E ASSESSMENT YEAR 2004 - 05 AND SET IT ASIDE BACK TO THE ASSESSING OFFICER FOR FRESH ASSESSMENT KEEPING IN VIEW THE ISSUES RAISED IN HIS ORDER. 5. THE LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE ERROR CLAIMED TO BE FOUND BY THE LE ARNED CIT WAS NEVER ACCEPTED IN VIEW OF THE SIMPLE FACT THAT THE ASSE SSEE BEING A LIMITED COMPANY HAD DULY AUDITED ACCOUNTS MAINTAINED I N COMPUTER AND THUS WOULD L EAVE NO ROOM FOR THE LEARNED CIT FOR RECTIFICATION OF THE ASSESSMENT WHICH ALONE WAS THE CRITE RIA IN THE MIND OF THE LEARNED CIT TO HOLD THAT THE CREDIT IN THE GROSS RECEIPTS FELL SHORT OF THE TDS AMOUNT DEDUCTION WHEN HE HIMSELF AGREED THAT THE CAPITAL WORK - IN - PROGRESS WAS ONLY THE PORTION OF WORK UNDERTAKEN ON WHICH TDS WAS TO BE DEDUCTED IN ACCO RDANCE WITH LAW AND NOT IN ACCORDANCE WITH COMPLETION OF CONTRACT I.TA.NO .198/CTK/2009 3 METHOD WHICH WAS ACCEPTABLE TO THE ASSESSING OFFICER FOR FRAMING ASSESSMENT. HE POINTED OUT THAT THE LEARNED CIT HAD COMMITTED THE BASIC ERROR OF INCORPORATING THE EXPENSES TO BE CAPITAL ISED AS WORK - IN - PROGRESS WITH THAT OF CONTRACT RECEIPT BEING PART OF THE CONTRACTS UNDERTAKEN BY THE ASSESSEE ALONG WITH THE WORKS CONTRACT FOR TDS AS ACCOUNTED HAS TO BE RECEIVED IN A PARTICULAR YEAR. HE POINTED OUT THAT THIS BEING SO THE VARIOUS DETAILS FOR MING PART OF THE BALANCE SHEET AND SCHEDULES AND THE PROFIT & L OSS ACCOUNT ARE TO BE READ WITH THE NOTES AND ACCOUNTS IN VIEW OF REVENUE RECOGNITION WAS CONSIDERED BY THE ASSESSING OFFICER WHEN HE SOUGHT TO DISALLOW ONLY A PORTION OF THE CLAIM U/S.80IB(1 O ) . IN ANY CASE EVEN IF IN THE EYES OF THE CIT THERE WAS AN ERROR IT COULD NOT STAND THE TEST OF IT BEING PREJUDICIAL TO THE INTEREST OF REVENUE WHICH HAS BEEN CONSIDERED BY THE HONBLE APEX COURT I N THE CASE OF MALBAR INDUSTRIAL CO. LTD. V. CIT (2000) 243 ITR 83 AS TO HAVE BOTH LIMBS. HE POINTED OUT THAT N THE FIRST PLACE THERE IS NO ERROR AS THE OBSERVATION OF THE LEARNED CIT IS A MISTAKE IF AT ALL RECTIFIABLE UNDER SECTION 154 AND WOULD NOT SET UPON TO VERIFY BY THE ASSESSING OFFICER WHI CH CONSIDERATION BY THE ASSESSING OFFICER TO GIVE CREDIT FOR THE TDS HAD ALREADY BEEN CONSIDERED IN THE LIGHT OF GROSS RECEIPTS AND THE PORTION THEREIN CAPITALIZED WHICH ONLY ARITHMETICALLY REMAINS TO BE CONCLUDED IN THE ORDER OF THE LEARNED CIT ITSELF. HE PERSU E THE ORDE R OF THE LEARNED CIT WHEN HE HAS TRIED TO QUERY BY EXPECTING A RECONCILIATION FROM THE ASSESSEE IN SO FAR AS THE COMPLETION CONTRACT METHOD INDICATE ONLY THE CONTRACT RECEIPTS PERTAINING TO THE ADVANCE FROM CONTRACTEE WERE INCORPORATED TO THE TAXABLE INCOM E OF THE ASSESSEE AND THE REMAINING CAPITALIZED AS WORK - IN - PROGRESS. HE THEREFORE IN PARA 4 AND 5 OF HIS ORDER CANNOT CONTRADICT HIS OWN FINDINGS OF THE MINOR DIFFERENCE IN TWO DIFFERENT ISSUES NOT TO BE EXPLAINED BY WAY OF ANY DOCUMENTARY EVIDENCE. HE AR GUED THAT FOR MAKING SUCH OBSERVATION THE ASSESSING OFFICER WOULD NOT HAVE PROCEEDED TO VERIFY THE SAME IN ACCORDANCE WITH WHAT HE HAD ALREADY CONCLUDED AND THEREFORE THE REVISIONARY EXERCISE U/S.263 WOULD HAVE RESULTED IN A FUTILE EXERCISE BUT ACEED I NG A DIRECTION OF THE LEARNED CIT TO CANCEL THE ORDER FOR ASSESSMENT AFRESH KEEPING IN VIEW THE ISSUES RAISED IN THIS ORDER . THERE IS NO CLEAR FINDING BY THE LEARNED CIT TO THE EFFECT THAT THE ASSESSMENT IS PREJUDICIAL TO THE INTEREST OF REVENUE . HE CONCLUD ED THAT THE LEARNED CIT HAS NOT BEEN ABLE TO FIND ANY ERROR OR EVEN A MISTAKE. HIS ORDER IS FIT TO BE QUASHED. 6. THE LEARNED DR SUPPORTED THE ORDER OF THE LEARNED CIT IN VIEW OF THE FACT THAT THE AMOUNTS NOTED FOR DISCREPANCIES MAY BE VERIFIED BY THE ASS ESSING OFFICER TO THE EXTENT THAT THE REVENUE RECOGNITION APART FROM UNILATERAL METHOD OF TAKING CREDIT OF TDS WAS ON THE BASIS OF ASSESSEE ACCOUNTING ON COMPLETION OF CONTRACT METHOD REMAINS TO BE I.TA.NO .198/CTK/2009 4 VERIFIED . IT WAS RIGHTLY CONS IDERED BY THE LEARNED CIT UNDER THE REVISIONARY POWER OF SECTION 263. 7. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES WE ARE INCLINED TO FIND FAVOUR IN THE SUBMISS IONS OF THE LEARNED COUNSEL TO THE EXTENT THAT ARITHMETICAL JUGGLERY HAS BEEN CONSIDERED BY THE LEARNED CIT FOR INVOKING THE PROVISIONS OF SECTION 263 AS PER THE SHOW CAUSE NOTICE RESULTING IN THE ORDER U/S.263. THERE IS NO ERROR IN THE ACCOUNT AS PER THE FINANCIAL STATEMENT PERUSED BY US AND SUBMITTED BY THE LEARNED COUNSEL IN THE PB PAGES 5 TO 26. THE LEARNED CIT CLAIM IS IN TRYING TO RECONCILE THE GROSS RECEIPTS ON THE BASIS OF WORKS CONTRACT AND THE PROJECT OF THE ASSESSEE WHO IS A REAL ESTATE DEVELOPER AND THEREFORE TRIED TO FIND AMOUNT MISSING EITHER NOT TAKEN IN GROSS RECEIPT WAS NOT IN ACCORDANCE WITH TDS CERTIFICATE WAS ONLY ON ITEMS OF REVENUE IN NATURE BEING BIFURCATED ON CAPITALIZATION OF WORK - IN - PROGRESS . TO RECONCILE THAT THE ASSESSEE SUCCESSFU LLY EXPLAINED THE IMPROPER DISCREPANCY NOTED BY THE LEARNED CIT IN HIS ORDER . WE HAVE CAREFULLY GONE THROUGH THE SAME AND ARE OF THE VIEW THAT THE ORDER OF THE ASSESSING OFFICER CANNOT BE CONSIDERED ERRONEOUS AND MORE SO PREJUDICIAL TO THE INTEREST OF REVE NUE ON THIS SCORE . IN FACT THE ASSESSING OFFICER IN HIS ORDER U/S.143(3) HAS ELABORATELY CONSIDERED THE FACTS OF THE ASSESSEE S CASE IN DULGING IN VARIED ACTIVITIES WHEREIN THE FIGURES OF CAPITALIZATION OF WORK - IN - PROGRESS ALONG WITH RECEIPTS OF WORKS CONT RACT HAVE BEEN VERIFIED BY THE ASSESSING OFFICER TO COME TO THE CONCLUSION THAT DEDUCTION 80IB(10) COULD BE ALLOWABLE ON THE CHARGEABLE INCOME OF THAT PARTICULAR UNIT. THEREFORE THIS FINDING OF THE LEARNED CIT BECOMES A SELF GENERATED ERROR FOR ASSUMING JURISDICTION U/S.263.IN SO FAR AS WE FIND THIS O N THE SUBMISSIONS OF THE LEARNED COUNSEL THE GROSS RECEIPTS WHICH WOULD TALLY WITH THE TDS CERTIFICATE HAD ALREADY BEEN VERIFIED TO THE EXTENT THAT AS PER LAW THE ADVANCE PAYMENT AGAINST INCOMPLETE CONTRACT ALSO SUFFERED TAX AT SOURCE WHICH HAS TO BE CLAIMED IN THE YEAR OF DEDUCTION ONLY. THE CAPITALIZATION THEREFORE IS ENTIRELY ON THE CERTIFICATI ON OF THE ARCHITECT WHO PROPOSES THE DIFFERENCE IF ANY BETWEEN THE AMOUNTS CLAIMED IN P & L ACCOUNT AND THE SCH EDULE OF WORK - IN - PROGRESS WHICH DIFFERS ON ACCOUNT FOR EXPENSES RELATING TO A PRIOR CONTRACT WOULD JUSTIFY AS A REVENUE EXPENSE. WE DO NOT FIND ANY INFIRMITY IN THE CONTENTION OF THE ASSESSEE BEFORE THE LEARNED CIT WHICH HAS BEEN REITERATED ABOVE. BEING SA TISFIED AT THE THRESHOLD THE LEARNED CIT COULD NOT JUSTIFY HIS SHOW CAUSE NOTICE VIS - - VIS A FINAL DIRECTION TO THE ASSESSING OFFICER SETTING ASIDE THE ORDER FOR FRESH ASSESSMENT. THE CONTRACT MONEY RECEIPT AND THE WORK - IN - PROGRESS VIEWED AS NOT IN ACCORD ANCE WITH THE TDS CERTIFICATES CAN BE BROUGHT ABOUT BY RECTIFYING MISTAKE I.TA.NO .198/CTK/2009 5 APPARENT FROM RECORDS REQUIRED RECONCILIATION OF MATCHING FIGURES AND NOT RECEIPTS AND PAYMENTS WHICH RECONCILIATION WILL BE EXERCISE IN FUTILITY. THEREFORE KEEPING IN VIEW THE TOT ALITY OF THE FACTS AND CIRCUMSTANCES WE ARE OF THE CONSIDERED VIEW THAT THE LEARNED CIT ORDER U/S.263 DOES NOT HAVE LEG TO STAND ON. THE SAME IS THEREFORE QUASHED. 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 23.07.2010 SD/ - SD/ - ( ) D.K.TYAGI JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER. DATE: 23.07.2010 - COPY OF THE ORDER FORWARDED TO : / THE APPELLANT : M/S.KESHARI ESTATES (P) LTD. 98 KHARA VEL NAGAR BHUBANESWAR / THE RESPONDENT : COMMISSIONER OF INCOME - TAX BHUBANESWAR. THE CIT THE CIT(A) DR CUTTACK BENCH GUARD FILE TRUE COPY BY ORDER [ ] SENIOR PRIVATE SECRETARY ( /) H.K.PADHEE SENIOR.PRIVATE SECRETARY. I.TA.NO .198/CTK/2009 6